It's In Your Interest to Act on Low Rates
MORRIS PLAINS, N.J.– Given the fact that real estate today is much more affordable than it was several years ago, it is understandable that those considering a home purchase in the near future are paying attention to prices. However, Weichert president and founder, Jim Weichert urges buyers to not overlook the impact today’s record-low interest rates are having on overall housing affordability.
“Paying a lower price for anything is always preferable. But if like most Americans you require financing to purchase a home, you have to also factor in the expense of borrowing money into the total cost,” said Weichert. “While a lower purchase price may seem like your best bet for savings, it is actually today’s historically low rates that are providing those who buy now thousands of dollars in savings over the life of a loan.”
According to the National Association of Realtors (NAR), housing affordability is currently approaching an all-time high. In fact, NAR’s Housing Affordability Index, which measures the ability of a household making the median income to buy a median-priced home, is nearly twice as high as it was during the recent housing boom.
While lower home prices have obviously contributed to the overall housing affordability, it is rates that are driving affordability to record levels. In the past, buyers fortunate enough to get a mortgage at six or even seven percent would be making out well. Now, it is commonplace to see 30-year fixed mortgages with a rate in the mid to low four percent range.
Perhaps the best way to understand the impact interest rates have on affordability is to see how even a slight increase impacts the monthly payment when purchasing a home. Say you bought a home for $300,000 with 10 percent down and a 30-year fixed mortgage at current interest rates, your monthly mortgage payment would be approximately $1,349. However, should rates rise just one percent your monthly payment would increase by $165. Over the span of 30 years that would cost a buyer an additional $60,000.
With a recent survey by Fannie Mae showing that 78 percent of Americans believe home prices will stay the same or increase over the next year, and with rates at an apparent rock-bottom level, it seems unlikely that housing affordability will rise much further. What seems far more possible is affordability begins to wane as prices stabilize and interest rates inevitably rise.
“Predicting the market is never an exact science but all indications seem to suggest that both home prices and rates are about as low as they are going to go. For those who are gainfully employed, financial secure and in the market for a new home, taking advantage of today’s housing affordability is really a no-brainer,” added Weichert.
Weichert has nearly 18,000 sales associates in more than 500 company-owned and franchised sales offices in key markets throughout the U.S. A family of full-service real estate and financial services companies, Weichert helps customers buy and sell both residential and commercial real estate, and streamlines the delivery of mortgages and home and title insurance. For more information, Weichert's customer service center can be reached at 1-800-USA-SOLD or at Weichert's Web site, www.weichert.com. Each Weichert franchised office is independently owned and operated.